Poland's Turn to Experience Russian Gas Pains

Where'd all the gas go? Nobody may really know...except the Russians.

Energy geopolitics between Russia and its European "customers" are fascinating to watch. On one hand, Russia has no marketing concept whatsoever about "fulfilling the contract" and other niceties in dealing with Western and Central Europeans it treats with utter contempt. Take that, NATO members! On the other hand, those Europeans are not exactly spoiled for choice when it comes to other sources of energy, so they must grin and bear Russia using energy as a weapon. Those Germans couldn't have picked a worse time to discontinue nuclear power, for instance.

Today's case in point is Poland. With 60% of its natural gas supplies coming from Russia, its energy profile is no different from many other dependent European "customers." A few days ago, it declared wholehearted support for beefing up NATO forces in Eastern Europe in the wake of the Ukraine crisis:

Speaking to journalists at the end of the first day of the NATO summit in Newport, Wales, Bronislaw Komorowski told journalists that alliance leaders will announce on Friday plans to beef up defences in eastern Europe following the crisis in Ukraine.

Though conceding that there will be no permanent NATO deployment in the region – as Poland and the Baltic states had been pushing for – he welcomed the construction of airbases and fuel and ammunition depots which would be used by a rapid reaction force, of around 4,000 troops, which could use the facilities at a moments notice.

Russia being the land of hardball, the Poles had it coming: all of a sudden, gas supplies from Russia are experiencing disruption. Russia claims technical difficulties, but most would suspect otherwise given the timing. Also consider that Poland has been re-exporting gas to Ukraine to make up for that lost through Russian export bans and you can put things together for yourselves. Just in time for the coming winter; fancy that:

A decision by Russia to cut gas exports to Poland without warning has rekindled fears about Europe's reliance on Siberian gas at a time of increasing tension between Moscow and the west. The Polish state energy group, PGNiG, said it was trying to find out why volumes had been slashed by up to 24% when it had been exporting gas itself to Ukraine to make up for Russian shortfalls there.

Its counterpart in Kiev, Ukrtransgaz, accused Kremlin-controlled Gazprom of penalising Poland and undermining onward gas supplies to Kiev. "Today Russia started limiting gas supplies to Poland in order to disrupt the reverse (flows) from Poland that we receive ... Poland stopped reverse supplies to Ukraine in the range of 4m cubic metres," said Ihor Prokopiv, chief executive of Ukrtransgaz, according to the Russian news agency, RIA.

Then again, others would argue that disrupting supplies right now when it's warm makes little sense as a political statement:

Jonathan Stern, a gas expert at the Oxford Institute for Energy Studies and a member of the EU-Russia Gas Advisory Council, believed there was more likely a technical, not a political problem.

"If Gazprom wanted to punish the Poles then it would not do so surely when the weather was warm and in breach of its contractual obligations," said Stern who met the Russians for a gas summit in Vienna this week. "The Russians are acutely aware that any (commercial) moves at this time will be interpreted in the worst possible light (by the west)."

On top of everything, Russia dishonoring gas contracts would eat into revenues. I guess when your economy is tanking, it may not matter much if it takes a bigger hit by annoying the customers. Then again, LNG exports to Asia may be the next big thing in Russia's plans.